Alibaba, U.S. Payment Processor to Pay $600 Million in DOJ Settlement Over Illegal Drug Sales — 2nd Update

By Elias Schisgall

Alibaba Group and a U.S.-based payment processor agreed to pay $600 million to resolve allegations from the Justice Department that they allowed merchants to sell and import illegal pharmaceuticals and other restricted items into the U.S.

The operator of Chinese e-commerce site Alibaba.com admitted that it failed to prevent merchants from engaging in around 80,000 sales that involved importing illegal items into the U.S. as part of a non-prosecution agreement, the DOJ said.

Those products included illegal pharmaceuticals, pharmaceutical counterfeiting equipment, and listed chemicals, and had a combined gross merchandise value of more than $200 million, the DOJ said. The sales took place between 2016 and 2024.

The company's failure to prevent those transactions violated the Federal Food, Drug, and Cosmetics Act, the DOJ said.

Though the company had policies to restrict the sale of prohibited products, some employees voiced concerns that those protections were inadequate, the DOJ said, adding that Alibaba also offered a private-messaging service that some merchants used to set up sales of illegal products.

An Alibaba spokesperson called the agreement a "mutually satisfactory resolution" in a statement Wednesday.

"This settlement reflects a thorough regulatory process with Alibaba's full cooperation and our commitment to best-in-class standards of control, policies, and measures against non-compliant product sales," the spokesperson said.

The U.S. payment processor, AUS Merchant Services, also admitted that its anti-money-laundering compliance program and transaction-monitoring system failed to prevent illegal sales, the DOJ said. It added that after merchants had been identified as selling illegal goods, AUS didn't systematically restrict their activity and instead referred them to Alibaba. One such merchant was allowed to continue selling prohibited goods even after its activity had been reported to Alibaba, the DOJ said.

An AUS spokesperson said the company was pleased with the resolution and continuously improves its compliance program.

As part of a federal investigation, undercover law-enforcement officials purchased illegal pharmaceuticals and counterfeiting equipment on more than 40 occasions, the DOJ said.

"Alibaba and AUS have documented steps taken to improve their screening and compliance and provided a commitment to ongoing cooperation with U.S. law enforcement in the future," Assistant Attorney General Tysen Duva said. "As a result, another channel for illegal pharmaceuticals and associated equipment is now closed."

Alibaba agreed to forfeit $200 million and pay an additional criminal penalty of $125 million, the DOJ said. AUS will pay $85 million in penalties and forfeit $190 million. Both companies also agreed to cooperate with the DOJ and bolster their compliance programs.

Write to Elias Schisgall at elias.schisgall@wsj.com

(END) Dow Jones Newswires

July 01, 2026 17:37 ET (21:37 GMT)